Good Morning! I am curious to know if you or your department is incented based on compliance performance or other related factors? If so, would you mind sharing how your shop works. For example, what measurements do you use and how is it scored?

Hi, Yes, we have one it's called "Comply or Die".
Just kidding, I just remind them during training
sessions that it's everyone's job to keep our bank safe and
in compliance with applicable laws and regs.
I feel that compliance is necessary, not above and
beyond their job descriptions, it is part of their job
descriptions. I also remind them that it will also ensure that we
have jobs.

Mgmt has talked about tying compliance into evaluation process, but so far they haven't done anything. This usually only comes up when one bank or another has a bad compliance audit. You know, when everyone fianlly gets all concerned about compliance !

Do you have specific measurements and are they attached to $$ provided you reach certain levels?

We have a lot of branches who don't believe compliance is important. We have have been toying with the idea of financially penalizing lenders who consistantly refuse to comply. Another large bank I know hits their lenders with a $250 fine for every compliance issue they find. Needless to say their lenders pay attention.

I have found that incentives or punishments don't really work, since those are turned to when management has failed to establish a culture that values compliance intrinsically.

I have been in several different situations and I have found management's attitude and tone setting is the key to good compliance.

Our compliance officer is a member of executive management and is included in the incentive program. Factors include exam ratings, external and internal audits, budget performance, special projects; as well as overall goals like ROAA, ROE, loan and deposit growth.

Last year I brought in a $20MM client to the bank. I got an attaboy. And I'm the one compliance person people actually like

At my previous bank my CEO wanted to fine lenders and branch managers with noncompliance, but I was not in favor of doing that. I proposed a quarterly report to executive committee with appropriate lenders, managers, or city presidents present. My staff reviewed files for compliance and credit quality. I had a legand on my table showing the most common errors noted on the report and labled them minor, major, and significant. I always showed it as a percentage adn my report was broken down by market. It worked better than anyone imagined. The directors really asked the supervisors why and when their percentages would improve. By my 3rd report our errors had diminished tremendously. I originally started with loans and when I left that bank we were developing a report for deposit reports as well. It really sparked a competition among the markets to have the lowest percentage of errors.

Wouldn't they pay even more attention if their buddies who do comply are rewarded? Get someone to unscrew the wallet from their back pocket and include some compliance bonuses along with the penalties.

As my commercial lender fiance stated, you shouldn't have to reward someone to do their job. He said about the only thing that would incent a lender (in his opinion) is fear, whether that be job or money.

Well frankly, I was pretty happy to work my bumm off for a huge incentive check every year, but...I worked in fear of being out of compliance. The banks I worked for did not take compliance lightly. If management's back bone is in the requirement to comply with regulations, your lenders will comply. If management won't take it seriously, no one will!

One bank I worked at had a REALLY hard time getting the tellers to comply with Reg CC. We wanted to encourage both the placement of holds (to minimize fraud) and to ensure that they were in compliance with Reg. CC. So we added a category to the branch operations manager's incentive structure. The goal was to be 95% error free on all Reg.CC hold notices submitted. So since doing only a couple holds each month was a killer if you had one that was wrong (4 holds submitted and 1 is wrong equals 75% compliance), the branches got smart and started looking for more opportunities to place holds in an effort to boost their numbers. It worked (and in relatively short order). Compliance was way up and fraud losses were decreased. I agree that compliance is part of everybody's job, but when you want quick results, money can be a great motivator. Just an idea.

I don't think that management should directly use incentives or disincentives to ensure compliance. I too think that it's a sign of a deficiency in the corporate culture. However, in the end, it does come down to the money. Those employees who won't do their part (there is no can't here) should be reprimanded and/or let go. Success in compliance means that the bank avoids fines, but it also means that the bank has an opportunity to build a good reputation. The bank will tarnish its reputation when it has to go back and refund fees or defend itself in court because its managers or employees have a cavalier attitude towards compliance. IMHO, complete customer service means that the bank conducts all parts of a transaction-- those that the customer can see and understand and those that he/she can't-- with excellence. Just my two cents.

Carrot or stick? My institution has bounced this idea around for several years with regard to HMDA. While I would love to have a good carrot story, I can tell you that the stick is the one that works, and it will reduce exceptions dramatically if applied justly. After years of training and re-inforcement our error rates were still averaging over 800/month - an intolerable level. We then developed reports we sent to management monthly that showed exceptions down to the individual lender level. These reports also compared the performance of different regions so that peer pressure between division chairs would help keep the focus on HMDA. New training sessions, other re-inforcement and the computerized application front-end was totally revamped so that the lender only had to choose the correct product based on the purpose from a touch screen. The application program did all of the thinking. After several months the error rate dropped to a consistent 300-400/month. At that point the head of the bank's Consumer Lending Division (not the Compliance officer) got tried of the overhead this was causing senior management and threatened to withhold loan and cross-sell product pay incentives for anyone who could not correctly identify a HMDA purpose loan. The error rate dropped to 250/month and after three months the errors were forwarded to Compensation where they backed out the related incentives from offending loan officers. The effect was dramatic as lenders flocked to gain a new understanding of this regulation for the first time. Error rates now run about 50/month and are continuing to spiral downward. While folks may wring their hands with concern for our corporate culture, etc. my Bank's management decided that a lender who through his/her neglect to detail caused the Bank to expend extra effort to comply with an essential regulation, possibly putting the institution at financial risk, should not be rewarded for booking the loan that creates the problem. So we built a carrot to make the lenders' compliance as painless as possible and when they choose not to use it we hit them over the head with it. PS- Your error tracking process must be impecable for this process to work.